Wednesday, 6 June 2018

Gov’t replaces Gazprom with Rosneft…signs new LNG deal

The government through the Ghana National
Petroleum Corporation (GNPC) has abrogated the gas sale and purchase agreement
(GSA) it signed with Gazprom in September last year.

It has happened as a result of GNPC
signing a new deal with Rosneft for the same natural gas supply agreement it
had with Gazprom. This means that, Gazprom has been dropped by GNPC for
Rosneft.

Gazprom has more capacity and capability
in all regards than Rosneft, and it is therefore a surprise to energy experts
for the decision government took.

However, a statement from GNPC announcing
the new deal with Rosneft said,“due to a corporate restructuring, Gazprom’s
supply obligations had been assumed by Rosneft.”

But, the statement didn’t specify the
details of whether GNPC will be losing in terms of compensation to Gazprom,
whether the abrogation of Gazprom was by a consensus or forced and whether
Rosneft has a direct link or dealing withGazprom which would mean Gazprom woud not be losing in anything from the
initial contract abrogation. Mr Alexander Mould is therefore demanding further
clarification from GNPC to show adequate transparency of the deal.

The GNPC statement indicated that, it has
struck a 12-year natural gas supply deal with Rosneft, a Russian integrated
energy company. The deal is seen an opportunity for increased investment in
Ghana’s oil and gas sector.

Under the agreement, Rosneft would deliver 250 million cubic feet of liquefied
natural gas (LNG) to a re-gasification terminal at the Tema Port, to be
processed and carried to the GNPC’s Tema Metering Station.

The signing event took place at the
sidelines of the just ended 26th St. Petersburg International Economic Forum –
an annual Russian business event, held in St. Petersburg.

Mr. Frederick Blay, the GNPC Board Chairman, and Igor Ivanovich Sechin, Chief
Executive Officer (CEO) and Chairman of the Management Board of Rosneft,
initialled the agreement for their respective companies.

The deal is expected to place Ghana at the centre of West Africa’s rapidly
growing energy market – provide job openings and building local capacity.

The statement added that the two companies also agreed to deepen their
cooperation in the development of the upstream and downstream sectors.

Mr. Blay expressed optimism that through “this strong cooperation, Ghana can
also act as a gateway for Russian investment within the wider West African
region”.

Notably, Mr Sechin said it was the beginning of a new phase of the development
cooperation between Russia and Ghana.

“Ghana has placed itself among dynamically developing world economies with the
energy demand growing year on year,” he stated.

Dr. Kofi Kodua Sarpong, CEO of GNPC is quoted as saying, “we are happy to be
working with Rosneft on this LNG transaction and already the two parties are
looking at greater cooperation and partnership in the upstream sector”.

Which Company is better placed to help
Ghana?

Apparently, a comparison of the two companies to ascertain which company is
better placed to serve the interest of Ghana reveals that, comparatively,
Gazprom has competitive advantage over Rosneft in all aspect of industry
indicators.

Gazprom’s capacity and capability

In September, 2017, Gazprom’s unit,
Gazprom Global LNG, the world’s largest producer of gas, signed a 12-year gas
sales agreement with Ghana National Petroleum Corporation (GNPC) starting in
2019.

The agreement was the first stage in a planned series of partnerships between
GGLNG and GNPC, with both companies working to develop the infrastructure and
services required to manage and market the projected gas flows from the region,
Gazprom said.

Under the agreement, Gazprom Global LNG would supply the chilled gas to the
import terminal at Tema before regasifying it and selling to GNPC. The long
term supply contract was expected to significantly increase the country’s
energy security, providing Ghana with 250 MMscf/d of competitively priced gas.

The project’s proposed technical configuration comprised a floating
regasification barge, floating storage unit and a pipeline to an existing gas
grid in Tema. The contract with Gazprom was expected to significantly increase
energy security in Ghana, providing the country with approximately 250 mmcf/d
of natural gas, with the contract volumes satisfying more than 1,000 MW of
thermal generating capacity.

The entry into Ghana of a major gas
company will undoubtedly transform the energy sector bringing access to gas
related finance and expertise on a world class level.Research suggested that, the deal struck by GNPC and
the Ministry of Energy would be underwritten by Gazprom’s large balance sheet
with no capital required from government.

Gazprom is the world’s largest supplier of gas and owner of gas related
infrastructure. It operates in all parts of the “gas chain” from exploration
and production, petrochemicals through to transportation, power production and
marketing of Liquefied Natural Gas to customers.

The company’s revenues in 2016 were $100bn, more than double Ghana’s GDP. It is
the largest supplier of gas to Western Europe and controls more than 200
billion barrels of energy or 17% of the world’s total overall gas resources.
Its portfolio of global assets would allow it to guarantee long term reliable
supply for Ghanaians.

The company is a leader in LNG production, with access to more than 50 million
metric tonnes of LNG.Its long term
supply contract with Ghana was to be for 1.7 million metric tonnes (250
MMscf/d) which would be added to existing long term sales to Japan, Korea,
China, India, Taiwan, the UK, the USA, Kuwait, the United Arab Emirates, Mexico
among others.

Ghana’s interest in gas is also fueled by
the country’s desire to rid itself of the problems associated with inefficient
and unstable power generation and supply.

Gazprom’s position as the world’s largest
producer of gas has allowed it to develop significant expertise in power
generation. As of 2016 it was also the world largest generator of thermal
energy owning more than 38,000 GW of power generating capacity. Ghana’s overall
thermal generating capacity is close to 3500MW.Gazprom’s strategy in Russia and
other markets has been to utilise its low cost of gas production to deliver low
priced and reliable electricity to both industrial and retail users.

Rosneft’s capacity and capability

Comparably, Rosneft, is also the world’s
largest listed energy company by production and reserves. Its main activities
include prospecting and exploration of hydrocarbon deposits, oil, gas and
gas-condensate production, upstream offshore projects, processing, as well as
oil, gas, and product marketing in Russia and abroad.

The Company is included in the list of strategic companies and organizations of
Russia. The Company’s largest shareholder (50.00000001% of the equity) is JSC
ROSNEFTEGAZ, fully owned by the Russian Government, while BP holds 19.75% of
shares, QHG Shares Pte. Ltd. holds 19.5% of shares, one share belongs to the
state represented by Federal Agency for State Property Management, whereas the
remaining shares are free floating.

Rosneft’s successful performance in 2016 is evidence of the efficiency of the
applied strategy and the significance of its priorities. All this makes it
possible to rely on Rosneft sustainable development in the future to benefit
its shareholders.

The Company’s oil refining and petrochemicals unit comprises 13 large
refineries situated in key regions of Russia, as well as three petrochemical
plants, four gas processing plants (including the assets of Bashneft and the
share in Slavneft-YANOS), two catalyst production plants and one service
company. In Germany, the Company holds stakes in three reﬁneries and controls
more than 12% of oil reﬁning capacities with the total annual reﬁning
throughput of 12.5 mmt, and in Belarus it indirectly owns 21% of shares in OJSC
Mozyr Reﬁnery.

As of the end of 2016, Rosneft was a
leader among comparable international public oil and gas companies in terms of
organic growth of reserves, the reserve replacement ratio, including the
organic reserve replacement ratio (excluding acquisition), and in terms of the
reserve life. The proven hydrocarbon reserve replacement ratio according to the
SEC classification stood at 148%. The organic reserve replacement ratio
amounted to 140%. In 2016, Rosneft’s proved hydrocarbon reserves according to
the SEC classification were sufficient for 19.9 years of production.

Rosneft is a leader in terms of volumes and cost of organic growth of reserves
among public oil and gas companies in Russia and abroad due to the
traditionally high efficiency of exploration.

Against the backdrop of the global growth
of production and use of gas as the greenest fossil fuel, Rosneft continues to
expand the share of gas in its asset portfolio and in hydrocarbon production
volumes (21%), gradually closing the gap between itself and major international
companies (30-50%).

In Q4 2016, the Company increased gas production and became a leader among
independent gas producers in Russia in terms of daily average gas production.
In 2016, gas production grew by 7.3%, reaching a record high of 67.1 bcm.